Relative of wealthy US retail family gets prison for insider trading
21/03/2023 23:43
By Nate Raymond
BOSTON, March 21 (Reuters) - A member of a wealthy
family that has held investments and leadership roles in
retailers like DSW owner Designer Brands Inc DBI.N and
American Eagle Outfitters Inc AEO.N was sentenced on Tuesday
to a year in prison for insider trading.
Prosecutors had urged U.S. District Judge Douglas Woodlock
in Boston to sentence David Schottenstein to nearly four years
in prison, saying he and two friends made $4.5 million trading
on inside information he gleaned from members of his family.
Schottenstein originally agreed to cooperate and testify
against those friends, Kris Bortnovsky and Ryan Shapiro. But he
backed out of his cooperation deal in November, leading
prosecutors to drop the charges against them.
His lawyers contended he had no choice but to stop
cooperating after anxiety made him suicidal and argued home
confinement would be sufficient punishment after he pleaded
guilty last year to conspiring to commit securities fraud.
Prosecutors said Schottenstein made more than $600,000
trading in 2017 and 2018 on information he gleaned from a
relative about merger and earnings announcements involving DSW,
now called Designer Brands; Aphria Inc; and Rite Aid Corp
RAD.N .
Prosecutors said he traded ahead of a 2017 DSW earnings
announcement; on news about a 2018 merger agreement between
Albertsons and Rite Aid that they later terminated; and a 2018
bid by Green Growth Brands for Aphria Inc, which failed.
He learned that information from a second cousin, Joey
Schottenstein, who sat on the board of Designer Brands and Green
Growth Brands. His father is Jay Schottenstein, Designer Brands'
executive chairman and American Eagle's chief executive.
Jay and Joey Schottenstein have previously through a
spokesperson expressed shock about "the illegal conduct and
breach of their confidences."
Prosecutors said David Schottenstein also tipped Bortnovsky,
the co-founder of hedge fund Sakal Capital Management, and
Shapiro, who founded inmate money transfer service provider JPay
and sat on the board of a Florida synagogue with Schottenstein.
While prosecutors have dropped criminal charges against
Bortnovsky and Shapiro, a civil case by the U.S. Securities and
Exchange Commission remains pending. They deny wrongdoing.
(Reporting by Nate Raymond in Boston
Editing by Chris Reese)
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